Two real estate investment firms active in the San Francisco market have closed their first deal together. TMG Partners and Alexandria Real Estate Equities have formed a venture to develop the 135,000 square foot 505 Brannan Street office building in San Francisco.

“This venture came about as a result of Alexandria contacting us. Had they not done so, we would have funded the development of the project with another equity partner,” says Matt Field, chief investment officer with TMG.

Stephen Richardson, chief operating officer and regional market director in San Francisco for Alexandria, did not respond to phone calls seeking comment for this story. The company has its corporate offices based in Pasadena.

Field would not comment on the development cost or what they paid to acquire the site for 505 Brannan. According to industry sources, a typical cost to develop office space in San Francisco now is somewhere in the range of $800 per square foot.

TMG has owned the site for 505 Brannan for about one month, when it purchased the site from the Bank of America. The project is going through the design review process at this time. “We are not sure as to when we will be starting the project. We are thinking that the total time from start to finish would be somewhere in the range of 24 months,” said Field.

TMG is uncertain if the project will be started on a speculative basis. This will depend on the tenant interest it receives between now and when the project is started. TMG has not made a decision yet as to what company it will hire to oversee the leasing efforts on the project. One significant aspect of this development is that it received a Prom M office allocation at the end of last year.

TMG remains upbeat about the San Francisco office market. “Our belief is that the market is still very attractive with strong demand from tenants that are looking for new space,” said Field.

505 Brannan is located within the SoMa West sub-market in San Francisco. This part of the office market in San Francisco tightened up during the first quarter of this year.

According to data from the San Francisco office of Colliers International, the vacancy in the first quarter dropped from 5.3 percent to 4.1 percent. The sub-market has in it 41 buildings amounting to 3.5 million square feet.